Colombia peso weakens amid renewed concerns about Venezuela

The Colombian peso weakened 1.2% on Thursday amid renewed fears that Venezuela may shut down trade with Colombia. 

The Colombian peso ended at 2,011.50 to the dollar from COP1,988.60 on Wednesday amid a session that exchanged $1.1 billion.

On Wednesday, Venezuelan President Hugo Chavez verbally attacked
Colombia while he denied accusations by Bogota that Venezuela supplied
Colombian leftist rebels with anti-tank rocket launchers.

Chavez also ordered a halt to the import of 10,000 cars from
Colombia and initiated import substitutes, in a sign of rising tensions
between the South American neighbors.

Earlier this year, Chavez said Venezuela would authorize Colombian
car assemblers to sell 10,000 vehicles to Venezuela but Colombia’s
trade minister, Luis Guillermo Plata, recently told Dow Jones Newswires
that not a single car was exported to Venezuela this year.

“Colombian markets have underestimated Chavez’s constant threats in
the past, but this time he is serious about cutting trade with
Colombia,” said Alexander Cardenas, head of research at local brokerage
Acciones y Valores.

Last week, Chavez froze diplomatic relations with Bogota while
threatening Colombian companies on Venezuelan soil with expropriation.
He also pledged to break commercial ties if there is any new
“aggression” from the neighboring country.

The deteriorating ties follow accusations from top officials in
Bogota that Swedish-made rocket launchers sold to Venezuela were found
in the hands of the Revolutionary Armed Forces of Colombia, or FARC.

As a result, Chavez ordered the withdrawal of his ambassador to Bogota.

Meanwhile, the yield on the benchmark local peso-denominated bond,
known as TES, maturing in 2020 ended at 9.034% from 8.91% on Wednesday
amid the tensions.

The yield on the TES bond increased even though consumer prices
fell 0.04% in July, sending inflation over the 12 months through July
to 3.28%, lower than the 3.81% in the 12-month period through June.

On the equity market, the IGBC stock index rose 0.6% to 10,437.56 points.

The most-heavily traded stock was state-owned oil company Ecopetrol, which rose 0.6% to COP2,785. Dow Jones)

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